Amazon FBA Financing Guide: How to Fund Your eCommerce Business – Step-by-Step

Ecommerce is booming, your business is going great and your products are selling like hotcakes. So obviously, you have one goal: keep growing.

But what at first sounds like a good plan can quickly become your downfall. The reason for a failed expansion is often that there is no appropriate cash flow management in times of rapid growth. In fact, poor cash flow management is one of the main reasons why (eCommerce) businesses fail.

If you don’t have the working capital to restock your inventory or pay for your freight forwarder, you can quickly slip into a downward spiral that can cost you your hard-earned business.

An easy way to avoid such a horror scenario is to use one of the several Amazon financing solutions out there and get an FBA loan. These solutions provide you with quick access to funding when liquidity is tight and help you keep your business running.

Today we will show you which funding options for Amazon sellers exist and what you need to consider when choosing one.

What Is Cash Flow & Cash Flow Management?

Cash flow refers to the monetary resources, both cash, and non-cash, that flow into and out of a company. It indicates the cash inflow generated by your company during a specific period, for example within a fiscal year. Positive cash flow means that more money goes into your company than goes out, a negative cash flow means that less money is going in than you need to cover your expenses.

Cash flow is an important indicator of how healthy your company is in terms of its financial situation and reflects the extent to which your company can finance and sustain itself. In general, the cash flow should reflect the entire flow of financial resources that moves within your company.

A well-thought-out cash flow management, i.e. precise planning of all income and outcome payments, is important in order to be able to compensate for deficits, secure reinvestments and operate your business in a flexible manner.

A good cash flow management often requires the use of external funding.

Why Do You Need Funding?

There are several reasons why you would need funding in the form of an FBA loan or advance payment.

Initial Investments

If you are just starting out and have not made any money with your Amazon business yet, an external Amazon financing solution might be right for you.

Especially in the beginning, you have to invest quite some money. Sourcing services, inventory and software purchases, rent for warehouses and 3PLs, and costs for other things will come up. Often, your savings and financial help from family and friends are not enough to get your business off the ground.

Meeting Increased Demand

Unfortunately, thousands of Amazon sellers have experienced the following situation: Everything is working out for your first order, the money has been properly budgeted and is fully invested in your first batch of inventory.

Now the product starts to sell well, and before you realize it, you quickly have to reorder to avoid being out of stock. Not only to keep up with the demand, but Amazon punishes you for not having enough inventory available.

The first re-order must be financed before enough cash flow is generated with the sales of the existing products.

Launch New Products

There are hardly any e-commerce companies that are successful in the long term with selling one product only. Sooner or later you should definitely add variations of your existing product or a new product to your assortment to reach more customers.

An eCommerce funding provider can help you to expand your product range without having to sacrifice your own financial resources or other inventory.

Scale Your Advertising

Especially in times of increased demand or during product launches you should run a lot of targeted advertising to draw traffic to your product listing. In these times it is important to build momentum, quickly increase sales, and collect reviews to attract more customers.

If your money is tied up elsewhere, for example when you have already spent most of your money on inventory, shipping etc., external financing can help you to run effective advertising campaigns.

Exploit Other Sales Channels

To only sell on Amazon can be dangerous. If your account or listings are suspended, your only revenue stream is lost and there is nothing you can do except hope for Amazon’s mercy and that you will be reinstated quickly.

Thus, it is advisable that you use other sales channels besides Amazon, such as your own online store or at least other marketplaces.

Not only will you minimize the risk of huge payment defaults, but you will also benefit from reaching far more customers, generating higher revenues and increasing your overall brand awareness.

However, successfully building these new sales channels is obviously not free of charge. If your capital is already largely tied to your activities on Amazon, you can resort to ecommerce funding services.

Sell Globally

There are many reasons to sell worldwide. If you are active in several marketplaces worldwide, you can balance sales fluctuations, take advantage of increased demand prior to international holidays and reach millions of new customers.

The additional inventory you need is best financed through third-party ecommerce financing providers.

Expand Your Business

At some point, you will need to invest some money in expanding your business.
Investments could include more staff, additional storage space or a bigger office. Sometimes your earnings are not enough for necessary investments, so you have to resort to external funds.

Stock up for Increased Season Sales

There are several key sales events during the year that you, as an entrepreneur, need to be well prepared for, such as Christmas, Black Friday and Prime Day.

For such events you should have more stock than usual available. If your capital is already tied up, it is worth applying for an Amazon seller loan.

Compensate Deficits

Entrepreneurs often face unexpected costs and payment defaults they cannot anticipate. For instance, additional tax payments or a slump in sales can tear a big hole in your budget.

Since they are constantly reinvesting, especially new companies and businesses that are in the process of growing often do not have a financial buffer to compensate for deficits.

To compensate for bad economic times, it can make sense to obtain a loan or some other form of funding to bridge the gap.

Beat Your Competitors

You are probably familiar with the famous saying that time is money. Even if this phrase is somewhat hackneyed, it is no less true – it’s important that you are always one step ahead of your competitors.

But adding new products to your product range or constantly developing your existing products will obviously cost money. In some cases, cash flow is often not sufficient to cover these expenses.

However, in order to outperform your competitors, it is particularly worth investing in a bigger stock and new product variations. The faster you want to increase your sales volume in order to secure your market share and win new customers, the more likely you will have to resort to external financing.

RememberThere Is No Such Thing as Bad Debt

Don't feel bad for getting a loan, it is completely normal to make use of external financial resources. You should see borrowing money for business investments as a tool to grow your business, not as something bad.

Who Can Provide You with Working Capital?

There is a vast array of funding options out there. We will introduce you to the most popular financing solutions for Amazon sellers and explain their pros and cons.

Friends and Family

For many entrepreneurs, the most obvious way to get money is to ask their family, friends and acquaintances. The main advantage is that you do not have to pay interest or any other fees.

However, the money you get from your friends and family is usually not enough to cover the costs for your planned investments. Also, merging your personal affairs with your business activities involves a high risk. If you fail, you may lose some of your most important relationships with your friends or family members.

So consider carefully whether the relationship will be able to withstand a possible failure of your business and the associated risk of you not being able to pay back the money. You can always start a new business, but you only have one family.


Many entrepreneurs draw on their savings when starting their business or when they want their business to grow. Again, the advantage is that there is no interest or other repayment fees to pay.

However, you should always see your savings as a “safety net”. If you invest all your savings in your business and then fail, you will have absolutely no financial means left to keep yourself afloat. In such a situation, you would have to take out loans with enormous interest rates that you can hardly pay back – ever.

Considering the high risk associated with investing all of your savings in your business, it makes more sense to get the money elsewhere.

Merchant Cash Advance (MCA)

With a merchant cash advance, sellers can borrow against the revenue from their credit card sales and repay it as a percentage of the sales on an agreed daily or weekly basis. You’re basically selling a part of your future sales in exchange for immediate access to money. Usually, you will also be charged a fixed fee and interest. As an Amazon seller, you receive the majority of your payments through credit card purchases, so an MCA may be a suitable option for you.

When you apply for an MCA, you normally need much less documentation and paperwork than you would need to apply for a traditional loan. Usually you do not need to provide any collateral or undergo a credit check. Thus, if you have a low credit score, have ever been bankrupt or have no previous entrepreneurial experience, you can still be approved for an MCA.

What makes an MCA so special is the fast application and approval process. If you need money quickly, you can get money much faster with an MCA than if you applied for a traditional bank loan. Once you’re approved for an MCA, you can receive the money (usually between $2,500 and $250,000) within a few hours.

However, although an MCA can be a good solution for you, there are also some downsides to consider. The repayment fees and interest rate can be much higher than those of other funding providers, so it can be difficult to meet your repayment schedule. Interest rates usually start at 15%, so a $100,000 loan will cost you at least $115,000.

A further disadvantage is that an early repayment has no advantages for you. Since the repayment amount is defined in advance, you will not be able to save interest if you repay the loan earlier than agreed on. With traditional small business loans and many other Amazon seller loans, an earlier repayment would result in less interest payments.

Factoring with Amazon Account Receivables

Factoring is a method of financing where a company sells their outstanding receivables to a factoring provider. Usually, Amazon transfers your earnings biweekly to your bank account, sometimes it can take up to 60 days until you receive your money. A factoring company pays you the outstanding amount right away (usually within 24-48 hours) minus a small percentage of the receivable which they keep as a reserve and an additional fee. Once the outstanding receivable has been settled, you will get the reserve back.

A simple example: A customer orders a product worth 1000€ from you. Then, on the same day, you sell this open receivable to a factoring company which will pay you between 800€ and 900€ for this receivable ($1000 minus the reserve and the fee) within 24 to 48 hours. After the payment is settled by the customer, you will get the reserve back.

The main advantage of factoring is that these loans are easy to get and within a short time frame. Also, you will not need to provide the factoring company with a collateral and the factoring company will not perform a credit check. Factoring can be a both great short and long term solution.

However, since the repayment of the reserve kept by the factoring company depends on your customers settling the outstanding payments, your costs will not fully be in your control.

Advance Payout from your Payment Provider

Similar to factoring companies, some cross-border payment providers also offer an advance payment of your Amazon earnings. The payment platform is connected to your seller or vendor central and can see the amount of your earnings and the expected payout you will receive from Amazon by the end of the payment period.

So instead of waiting weeks or months for your earnings to be transferred to you from Amazon, your payment service will give you the money immediately in return for a small fee.

Crowdfunding Platforms & Kickstarter Campaigns

If you have an innovative product idea, a crowdfunding campaign could be a great funding solution for you. With crowdfunding, you simply post your idea on a crowdfunding platform and ask the public to support your project, i.e. your product idea.

You describe which product you want to develop, why you want to develop it and how much money you need for the development. If people like your idea, they can contribute to its funding.

Whether or not a project is being realized is thus not decided by a traditional authority – such as a bank or funding institution – but directly by the crowd.

What the crowd receives in return for their investment depends on the chosen crowdfunding model. When it comes to product funding, it is normal for the crowd to receive non-financial compensation for their investment. This can be either a small thank you or a sample of the finished product. The crowdfunding then constitutes a pre-sale.

The beauty of crowdfunding is that you get instant feedback on your product. You can see how well your product is resonating with potential customers, what suggestions for improvement they have and how much demand there is.

However, financing your business through crowdfunding also has its downsides. First of all it’ s very hard to draw attention to your campaign. You usually have to run online ads to make people aware of your project. In the worst case you will waste a lot of money on Facebook Ads and the like and still won’t get the required funding.

In addition, it usually takes a long time until you reach your campaign goal and you expose your product idea. Someone with the appropriate amount of capital could see your campaign, steal your product idea and simply produce the product before you have the necessary funds.

Banks & Loan Institutions

You can also apply for a traditional bank loan. If you are granted a conventional bank loan, you will usually receive a relatively low, fixed interest rate, allowing you to precisely plan your budget.

However, you should be aware that your chances of success are not the best.
Banks and traditional credit institutions are usually not the biggest fans of “new” business models. Although the willingness to grant Amazon seller loans is increasing, their acceptance is still rather low.

If you haven’t made any sales yet, have no entrepreneurial experience in trading goods and have no collateral to show, your loan application will most likely be rejected.

The biggest drawback, however, is that you have to provide a lot of paperwork and that the bank needs a lot of time to review your documents. Thus, it usually takes several weeks or months until your loan application is approved – or rejected. If you need the money quickly, it may be already too late by then.

Ecommerce Funding Services & Amazon Seller Loans

A while back, several companies realized that there is a big issue with eCommerce funding: while the number of online businesses is constantly growing, banks are still critical of these business models and often deny eCommerce entrepreneurs access to funding. To solve this problem, several companies have specialized in financing solutions for Amazon sellers and other eCommerce merchants.

They understand your business model, are familiar with the particular challenges of eCommerce businesses and know exactly what is important when it comes to financing them.

Almost all of the eCommerce funding services provide a fast and all-digital application process. Some of them will even let you know in real-time whether you’re eligible for funding or not.

Amazon Lending Program

The Amazon business financing program “Amazon Lending” supports small and medium-sized companies and offers eligible Amazon sellers access to loans. Since the financing solution was launched in the USA in 2012, the program has been extended to many other countries. In 2020 Amazon Lending is available in the following countries:

  • United States
  • Canada
  • The United Kingdom
  • France
  • Germany
  • Italy
  • Spain
  • India
  • China

Not all sellers are eligible to participate in the Amazon program. Amazon is selecting the sellers that will receive a credit offer. Whether you’re eligible for a loan is determined by a set of algorithms that will evaluate your selling history on Amazon. The retail giant works together with local banks and other credit institutions to finance the loans. In the USA, for example, this is Goldman Sachs, in Germany ING Deutschland.

The repayment term ranges from 12 to 36 months (depending on where you’re located) and the repayment amounts are automatically deducted from your sales proceeds. How much money sellers can borrow from Amazon is unknown, but it is rumored that it is between 1,000 and 750,000 dollars.

Amazon doesn’t disclose the exact interest rates for their loans, but it is rumored that they range anywhere from 6% to 16%.

A big advantage is that the application process only takes a few clicks and that you will receive the approval within a few days. Besides, you can repay your loan partially or completely at any time without having to pay an early repayment fee. This allows you to save on interest charges.

However, like any eCommerce funding program, the Amazon Lending Service does not have advantages only. For instance, you will face very high fees if you pay your installments too late.

Ecommerce Funding Options vs. Traditional Funding Options

As you can see, there are many different financing options available. A fundamental question you need to ask yourself is whether you want to use traditional funding, such as a bank loan, or e-commerce funding solutions. Our position is clear: eCommerce funding services are the better option.

Although bank loans usually involve lower interest payments, there are usually early repayment penalties. This means that you have no advantages in paying off your loan ahead of schedule.

Also, banks are not too comfortable lending to online merchants because they don’t know the business processes very well. You will need to submit a lot of paperwork, and it usually takes a long time before you receive your approval or rejection notice.

Ecommerce funding providers know how important it is to quickly receive money in order to secure cash flow, so after your application, you will know in no time if your FBA loan is approved or not. Also, unlike conventional loans, they usually do not affect your credit score.

What Are the Requirements in Order to Qualify for Ecommerce Funding Solutions?

No matter which Amazon financing provider you choose, you will need to provide some basic information in order to be considered for a business loan.

Before you start applying for different funding options, you should get those documents ready to save valuable time and streamline your funding application process. Documents you may need include:

  • Tax returns (both business and personal)
  • Bank statements (both business and personal)
  • Financial Records
  • Credit score and credit history
  • Profit and loss statements

If you already have some good results to show, your chances of getting an Amazon seller loan at good conditions are obviously higher than if you are only at the beginning of your entrepreneurial journey. Which terms you will be offered depends on you and your company’s previous performance.

5 Steps: How to Find the Best Funding Solution for Your Business

Step 1: Carefully Check Your Financial Situation

Before you start looking for a suitable funding provider, you should carefully examine your financial situation. Monthly sales, profits, ongoing fixed costs, estimated variable costs, financial reserves and so on.

Only when you understand your financial situation, you will be able to determine which financing options suit your situation and which repayment terms are feasible for you.

Step 2: Estimate How Much Money You Need

Once you know your financial situation, you should think about how much money you need – and then think of asking for some more. It is always good to have a little extra cash on hand. If you are already making the effort to apply for funding, you might as well go for a larger amount.

The capital budgeted for is often gone faster than expected. If you take out a higher loan right away, you will have a solid financial buffer.

Step 3: Get Your Documents Ready

Prior to picking up the phone or applying online to some eCommerce funding providers, you should first compile the relevant documents.

If a potential lender contacts you and you are not yet prepared, you will make a bad and chaotic impression.

And who would you rather grant a loan to – a well-prepared, properly organized, and serious businessman or an absent-minded, unprepared applicant?

Step 4: Compare Different Providers

Instead of choosing the first best option, you should compare the offers of different credit providers and their respective credit conditions.

The following criteria should be considered:

  • Credit amount
  • Loan term
  • Loan interest
  • Additional fees
  • Repayment terms
  • Penalties for late payments

Step 5: Only Agree to Conditions You Can Meet

Finally, our most important advice: no matter how good a credit offer sounds, if there is even one single condition in the credit terms that you cannot meet, you should not accept the loan.
It is very wise to borrow money to finance the expansion of your business. However, it is very foolish to borrow money on terms that make it impossible for you to repay the money as agreed.

Being too optimistic about how quickly and smoothly you can repay the loan can break your entrepreneurial neck. In the worst case, you could end up in a downward spiral of new loans to pay off old loans and eventually go bankrupt. However, if you are honest with yourself and the lender, you can develop a great loan agreement that you are both satisfied and comfortable with.

Bottom Line

It takes money to make money – and that money doesn’t necessarily have to be your money. When choosing a funding provider, however, make sure that you meet the lender’s borrowing conditions and are comfortable with the repayment terms.

As an Amazon seller, it makes sense to use a funding service that is specialized in eCommerce businesses because they can best understand your needs.

Toby Fischer, MBA

After 10+ years in the B2B tech marketing industry, we know exactly how to get more exposure for your company. Leverage our marketing solutions to build a strong brand and become an authority in your market. Learn more about our marketing and advertising solutions.

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